The positive cues from the US and China could not help the stock markets to sustain its uptrend and turned into negative territory. The weekly expiry also put pressure on the markets. Banks and financials did hold up but autos weakened during the day and kept the pressure on the markets. The A/D was also extremely unfavourable at 15:35. Nifty closed below the psychological 11,000 mark.

Brent Crude cracks fell close to the $60/bbl mark as Iran story plays out

The US hint at easing of sanctions on Iran pushed down oil prices sharply. In the last 24 hours, Brent Crude has lost over 5%. Markets are expecting that the easing of Iranian sanctions would be instrumental in increasing the supply of oil in the market and push prices lower. Meanwhile, Nigeria and Iraq have agreed to cut oil supply to support oil prices to profitable levels.

Higher inflation was in line with street expectations and even managed to touch a 10-month high level of 3.21%. The push to inflation came from the food basket with vegetables and pulses becoming dearer. This is slightly higher than 3.15% reported in July. Rural inflation was sharply lower than urban inflation and could be a hint of rural slowdown in demand. RBI comfort level is up to 4%.

On a YOY basis, the index of industrial production (IIP) was down from 6.2% to 4.3%, largely driven by weakness in manufacturing. Over the last one year, manufacturing (the largest component of IIP) fell from 7% to 4.2% driven by a slowdown in demand. While the growth in the mining sector was higher in July 2019, the electricity generation sector showed signs of weakness.

The addition of mutual fund folios in August was exactly half of the folio additions in the month of July. Folios are numbers designated to investor account of an AMC and a single investor could have multiple folios in this case. The good news was that nearly 4.12 lakh folios out of these represented equity and ELSS folios which indicate that retail interest is active despite market volatility.

In a bid to boost growth, the ECB promised stimulus buying of bonds as long as the slowdown lasted. In fact, the ECB even cut its deposit rates by another 10 basis points to (-0.50%) and backed it up with bond purchases worth Euro 20 billion per month from November onwards. This move by the ECB is likely to put further pressure on the Fed to get more dovish on rates.

Drought and floods could cut sugar output by 20% this season; ISMA

The ISMA has warned that the mix of drought and heavy rain conditions across India could cut the overall sugar output by nearly 20%. This would be the lowest sugar output in the last 3 years and should help bring prices higher to more remunerative levels. In the last 2 years, the government has been forced to subsidize the export of sugar to reduce the domestic glut and support prices.

Other news highlights

The Index of Industrial Production (IIP) rose by 4.3% in July, against 1.2% in the previous month. (BS)

Consumer price index-based inflation (CPI) for August crept up slightly to 3.21% yoy, compared with 3.15% in July, driven by a sharp rise in food prices. It is still comfortably below the Reserve Bank of India’s 4 per cent mark. (BS)

A scheme to augment the availability of export credit at affordable terms and in sufficient volume will soon be unveiled, said Commerce and Industry Minister. This scheme will include forex credit. The scheme, which aims to ease availability of export credit especially for small businesses, will likely lead to rates dropping to the sub 4% category. (BS)

Key states have expressed reservations on a cut in the goods and services tax (GST) rate for the auto sector because of the grim revenue situation, after the fitment panel refrained from recommending any such reduction. Facing a deepening slowdown, the auto sector is pinning hopes on the GST Council meeting on September 20 for a rate cut from 28% to 18%. (BS)

Bank credit and deposits growth slowed to 10.24% and 9.73% to Rs 96.80 trn and Rs 127.80 trn, respectively, in the fortnight to August 30, show the latest RBI data. (BS)

Thirteen years after it first undertook a price discovery exercise for natural gas, Reliance Industries, along with UK partner BP, will be selling 5 mscmd from its R-cluster field in the Krishna-Godavari basin through an e-auction mechanism. (BS)

Hindustan Unilever (HUL), is leading the race to pick up Nagpur-based Dinshaw’s Dairy Foods, which has been on the block since April. HUL is negotiating an all-cash deal at Rs 10 bn with the promoters of Dinshaw’s. (BS)

Larsen & Toubro said it has procured 'significant' orders in Maharashtra and Odisha. According to the company's project classification, the total value of the 'significant' contract falls in the range of Rs 10 bn - Rs 25 bn. (BS)

Sical Logistics said it has an external debt of Rs 1.49 bn, which has been secured by the personal guarantees of late Coffee Day Group promoter V G Siddhartha, and "strategic alternatives" are being worked out to deleverage the company. (BS)

JSW Steel will move the National Company Law Appellate Tribunal seek immunity from the ongoing criminal fraud cases against Bhushan Power and Steel Ltd. (BL)

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